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AP Microeconomics

Subjects : economics, ap
Instructions:
  • Answer 50 questions in 15 minutes.
  • If you are not ready to take this test, you can study here.
  • Match each statement with the correct term.
  • Don't refresh. All questions and answers are randomly picked and ordered every time you load a test.

This is a study tool. The 3 wrong answers for each question are randomly chosen from answers to other questions. So, you might find at times the answers obvious, but you will see it re-enforces your understanding as you take the test each time.
1. The most desirable alternative given up as the result of a decision






2. Production of the combination of goods and services that provides the most net benefit to society. The optimal quantity of a good is achieved when the MB = MC of the next unit and only occurs at one point on the PPF






3. The rate paid on the last dollar earned. This is found by taking the ratio of the change in taxes divided by the change in income






4. The philosophy that a citizen should receive a share of economic resources proportional to the marginal revenue product of his or her productivity






5. The change in quantity demanded resulting from a change in the price of one good relative to other goods






6. Goods that are both rival and excludable. Only one person can consume the good at a time and consumers who do not pay for the good are excluded from consumption






7. The firm hires the profit maximizing amount of a resource at the point where MRP = MRC






8. The more of a good that is produced - the greater the opportunity cost of producing the next unit of that good






9. Characterized by many small price-taking firms producing a standardized product in an industry in which there are no barriers to entry or exit






10. A period of time long enough to alter the plant size. New firms can enter the industry and existing firms can liquidate and exit






11. Ei = (%dQd good X)/(%d Income)






12. Exists if a producer can produce more of a good than all other producers






13. A good for which higher income increases demand






14. The difference between your willingness to pay and the price you actually pay. It is the area below the demand curve and above the price






15. Occurs when LRAC is constant over a variety of plant sizes






16. All firms maximize profit by producing where MR = MC






17. A legal minimum price below which the product cannot be sold. If a floor is installed at some level above the equilibrium price - it creates a permanent surplus






18. The imbalance between limited productive resources and unlimited human wants






19. The case where economies of scale are so extensive that it is less costly for one firm to supply the entire range of demand






20. The ability to set the price above the perfectly competitive level






21. Two goods are consumer complements if they provide more utility when consumed together than when consumed separately






22. Ei > 1






23. The difference between the price received and the marginal cost of producing the good. It is the area above the supply curve and under the price






24. Product demand - productivity - prices of other resources - and complementary resources






25. Direct - purchased - out-of-pocket costs paid to resource suppliers provided by the entrepreneur






26. A market structure characterized by a few small firms producing a differentiated product with easy entry into the market






27. The difference between total revenue and total explicit and implicit costs






28. ATC = TC/Q = AFC + AVC






29. The change in total product resulting from a change in the labor input. MPL = dTPL/dL - or the slope of total product






30. Occurs when there is no more incentive for firms to enter or exit. P=MR=MC=ATC and profit = 0






31. The total quantity - or total output of a good produced at each quantity of labor employed






32. The least competitive market structure - characterized by a single producer - with no close substitutes - barriers to entry - and price making power






33. The additional benefit received from the consumption of the next unit of a good or service






34. Holding all else equal - when the price of a good rises - consumers decrease their quantity demanded for that good






35. Substitutes - cost as percentage of income - and time to adjust to price changes all influence price elasticity






36. Ed = 8 - infinite change in demand to price change






37. Consumer income - prices of substitute and complementary goods - consumer tastes and preferences - consumer speculation - and number of buyers in the market all influence demand






38. Exists if a producer can produce a good at lower opportunity cost than all other producers






39. Factors of production - 4 categories: labor - physical capital - land/natural resources - and entrepreneurial ability






40. Goods that are both nonrival and nonexcludable. One person's consumption does not prevent another from also consuming that good and if it is provided to some - it is necessarily provided to all - even if they do not pay for that good






41. Labor demand for the firm is MRPL curve. The labor demanded for the entire market DL = ?MRPL of all firms






42. The downward part of the LRAC curve where LRAC falls as plan size increases. This is the result of specialization - lower cost of inputs - or other efficiencies of larger scale.






43. The rational decision maker chooses an action if MB = MC






44. Total revenue rises with a price increase if demand is price inelastic and falls with a price increase if demand is price elastic






45. Pm > MR = MC - which is not allocatively efficient and dead weight loss exists. Pm > ATC - which is not productively efficient. Profit > 0 so consumer surplus is transferred to the monopolist as profit






46. Production inputs that the firm can adjust in the short run to meet changes in demand for their output. Often this is labor and/or raw materials






47. A legal maximum price above which the product cannot be sold. If a floor is installed at some level above the equilibrium price - it creates a permanent shortage






48. The difference between the monopolistic competition output Qmc and the output at minimum ATC. Excess capacity is underused plant and equipment






49. Production of maximum output for a given level of technology and resources. All points on the PPF are productively efficient






50. The practice of selling essentially the same good to different groups of consumers at different prices